Quote from @Jeremy H.:
I think it depends - 100k rehab is no joke - how do you plan to finance that? The other thing - it's currently rented so you can just ride that out anyway. Not like it's vacant and you have no income on it. What's the 100k in updates for? Seems odd to need to spend 100k when the place is occupied and not in the worst shape. Will it be generating income at that purchase price? I just can't imagine seeing a 10%+ return on that 100k to make it worth the updating. I would personally just turn each unit over as they come back up for lease, then increase the rents and fix it up over time. 100k is a downpayment on another place and/or reserve funds.
I, like you, have gotten tired recently. Last house I closed on was Sept last year - I let it sit and started working on it in March. Costs less to let it sit than paying a contractor 2-5k/week, I'm going to DIY some, and the location is awesome so no need to worry about break-ins/vandalism.
If it's a great deal - I'd say go for it. Being leveraged for a bit isn't the end of the world - there are usually options available if push comes to shove - 401k loan, personal loan, sell stocks, credit card (then balance transfer continuously until you can pay the balance off) and lastly sell. It looks like you have plenty of equity in your other properties, so you have a worst case exit plan (and several exit plans at that)
How'd you get the equity in your other properties? High downpayments or covid era appreciation?
Thanks, Jeremy, for the long reply! The 100k in upgrades would likely be a renovation loan, or I would slowly add equity and then do a cash out refi enough to do the major things - replace roof, update kitchens and bathrooms etc. For sure would sit on it a while as it is already rented. The great thing about this one is the 3 separate units, so I could work on them one by one.
The leverage issue - My current back up plan if disaster strikes is that HELOC on my first property, so if I use that for a down payment I don't have that back up. I just don't know if my DTI would allow for a second HELOC on another property if something disastrous did happen - like an earthquake or something (which did happen here 2 years ago). I am paying off a small LOC and 0% credit cards from the last property - this will take a few months. Can't get approved for any more credit cards due to using credit too much I guess. No access to 401k loan, don't have stocks. Wage income is minimal - 3k per month. What is your nest egg for emergencies?
The equity in the properties primarily came from finding properties that were "scary looking" so sellers took a low offer, and the added equity after rehab was far greater than the actual cost of rehab. A lot of sweat equity. Plus covid era appreciation yes.
Fun to hear about your project. Sept - March - I can't let a property sit that long! For me, everything has to pay for itself as soon as possible, and each project has to stand alone. But I get being tired - I'm caught between being totally obsessed and also just so weary.
